BEIJING - China's leading search engine Baidu Inc announced Tuesday that it will buy all equity interests in smartphone apps distributor 91 Wireless Websoft from NetDragon for a record $1.9 billion.

The move, which is Baidu's latest effort to diversify beyond its core search engine business, is set to mark China's biggest merger and acquisition (M&A) in the Internet market after Yahoo's $1 billion deal with Alibaba in 2005.

According to the MOU, Baidu will purchase the entire issued share capital of 91 Wireless for a total of $1.9 billion.

Baidu and NetDragon will further negotiate and agree on the relevant terms of the proposed acquisition by August 14 as the "Long Stop date" to buy Hong Kong-listed NetDragon's 57.41-percent stake in 91 Wireless.

NetDragon is restricted from approaching or discussing with any third parties the sale of 91 Wireless.

Baidu said it intends to purchase the remaining equity interests in 91 Wireless from other shareholders based on terms and conditions similar to those offered to NetDragon, if they are willing to sell by August 14.

In May, Baidu announced its plan to buy the online video business of PPS to rival industry leader Youku Tudou, which was created last year through the merger of the country's two major video giants, Youku and Tudou.

The deal came on the heels of Alibaba's announcement in April that it would take an 18-percent share in Sina Corp's microblogging service Weibo and a 28-percent stake in digital mapping company AutoNavi Holdings Ltd.

Experts said the M&A spree highlights the intense competition among Internet giants to secure dominance of the mobile Internet market, as an increasing number of Chinese are going online through mobile devices.

Data from the China Internet Networks Information Center show that China's online population reached 564 million as of the end of last year, with the number of mobile Internet users hitting 420 million.